What’s Affecting Inflation Around the World?

What’s Affecting Inflation Around the World?

We know how surging energy costs have increased inflation, especially in Europe, after fossil-fuel prices nearly doubled in the past year. Rising food prices have also helped to increase inflation.

contributed to inflation

Meanwhile, continuing supply chain disruptions, clogged ports, logistics strains, and strong demand for merchandise have broadened these price pressures, especially in the United States. Higher imported goods prices have contributed to inflation in some regions, including Latin America and the Caribbean.

emerging and developing economies

Inflation is likely to remain elevated. This year’s price gains will average 3.9 percent in advanced economies and 5.9 percent in emerging and developing economies before subsidizing next year.

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higher inflation

Assuming inflation expectations remain well-anchored and the pandemic eventually eases its grip, higher inflation should fade as the supply chain woes ease, central banks raise interest rates, and demand tilts more toward services instead of goods-intensive consumption.

Oil futures contracts indicate crude prices will rise about 12 percent this year as natural gas prices climb about 58 percent. Such increases for both commodities would be considerably less than their gains last year and likely be followed by falling prices in 2023 as supply-demand imbalances ease further.

Similarly, food prices are likely to climb at a more moderate pace of about 4.5 percent this year and decline next year—after a rise of 23.1 percent last year, according to the United Nations Food and Agriculture Organization. This should ease spending pressures for millions worldwide, especially in lower-income countries.

Such burdens fall most heavily on residents of emerging and low-income nations, where food typically makes up a third to half of the consumer spending. That share is smaller in advanced economies, such as the United States, where food accounts for less than one-seventh of household shopping bills.

Rising inflation has stoked social unrest in several nations, notably Chile, Colombia, Sudan, and Venezuela. In some cases, protests have been linked to other grievances, such as discontent over government policies or frustration with a lack of economic opportunity.

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Inflation can impose particular hardships on the elderly and other groups whose incomes are relatively fixed. It also can worsen poverty and income inequality.

Inflation has picked up in many economies as their output has recovered from the pandemic-inflicted recession. That’s partly because businesses have had to raise prices to cover higher costs for raw materials and other inputs, such as shipping. The reopening of businesses and schools has increased demand for goods and services, driving up prices further.

Inflation can be a boon to companies and workers by increasing wages and profits. But it can also hurt economic growth if it accelerates too quickly, leading central banks to raise interest rates and cool off activity.